No GST on employees portion of canteen charges collected by employer for payment to service provider: AAR Gujarat

Case details: Authority for Advance Rulings, Gujarat Tata Motors Ltd., In re [2021] 129 taxmann.com 277 (AAR - GUJARAT)

Judiciary and Counsel Details

• • Sanjay Saxena and Arun Richard, Member.
  • Rajesh Shukla and Mukesh Dokania for the Applicant.

Facts of the Case

The applicant submitted that it was maintaining canteen facility to its employees at its factory premises to comply with the mandatory requirement of maintaining the canteen as per the Factories Act, 1948. It was submitted that it deducted nominal amount from employee’s salary for availing canteen facility. In other words, difference between amount paid to service provider and amount recovered from employees would be cost to company as salary cost. It filed application for advance ruling to determine whether input tax credit (ITC) would be available on GST charged by service provider on canteen facility provided to employees working in factory and whether GST would be applicable on nominal amount recovered by Applicants from employees for usage of canteen facility.

AAR Held

The Authority for Advance Ruling observed that proviso to section 17(5)(b)(iii) of CGST Act which provides that input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force would not be applicable on supply of food and beverages by employer as it not for section 17(5)(b)(i) of CGST Act which restricts ITC on supply of goods or services of food and beverages. However, GST, at the hands on the applicant, would not be leviable on the amount representing the employees portion of canteen charges, which would be collected by the applicant and paid to the Canteen service provider.

Also Watch Taxmann's video presentation on GST treatment of amount recovered from employees.